PepsiCo, Inc. Fundamental Analysis

Management

CEO: Ramon Laguarta

Tenure: 5.0 years

PepsiCo, Inc's management team has an average tenure of 4.6 years. It is considered experienced.

Source of Revenue

PepsiCo, Inc. manufactures, markets, distributes, and sells various beverages and convenient foods worldwide.

The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.

Frito-Lay North America

FLNA produces and sells various branded convenient foods like dips and popular snacks like Cheetos, Doritos, Lay’s, and more. They distribute these products to independent distributors and retailers. FLNA also partners with Strauss Group to sell Sabra refrigerated dips and spreads.

Quaker Foods North America

QFNA produces and sells various branded convenient foods like cereals, rice, pasta, and other products. Some of their popular products include Cap’n Crunch cereal, Quaker Chewy granola bars, and Rice-A-Roni side dishes. They distribute these products to independent distributors and retailers.

PepsiCo Beverages North America

PBNA produces and sells various beverages under brands like Aquafina, Gatorade, Pepsi, and more. They have their bottling plants and sell finished goods directly to distributors and retailers. PBNA also works with independent bottlers in some markets. They have joint ventures for tea and coffee with Unilever and Starbucks. Additionally, they distribute licensed brands like Crush and Dr Pepper. In 2022, they began distributing Hard MTN Dew, an alcoholic beverage. They sold some juice brands in 2022 but retained a 39% interest in a joint venture called Tropicana Brands Group (TBG). PepsiCo exclusively distributes TBG's brands to certain customers in the US.

Latin America

LatAm produces and sells various convenient food brands like Cheetos, Doritos, Lay’s, and Quaker. They also handle beverage concentrates and finished goods for brands like Gatorade and Pepsi. These products are distributed to authorized bottlers, independent distributors, and retailers.

Europe

Europe produces and sells various convenient food brands like Cheetos, Doritos, Lay’s, and Quaker. They also handle beverage concentrates for brands like Pepsi and 7UP. These products are sold to authorized bottlers, distributors, and retailers. Europe also manufactures SodaStream products and dairy items like Agusha and Chudo. They have a joint venture with Unilever for Lipton tea. In 2022, they sold some juice brands but retained a 39% interest in TBG.

Africa, Middle East and South Asia

AMESA produces and sells various convenient food brands like Chipsy, Doritos, and Lay’s. They also handle beverage concentrates for brands like Pepsi and 7UP. These products are sold to authorized bottlers, distributors, and retailers. In some markets, AMESA operates its bottling plants. They also have a joint venture with Unilever for Lipton tea.

Asia Pacific, Australia and New Zealand and China Region

APAC produces and sells various convenient food brands like BaiCaoWei, Cheetos, and Lay’s. They also handle beverage concentrates for brands like Pepsi and 7UP. These products are sold to authorized bottlers, distributors, and retailers. APAC also partners with Unilever for ready-to-drink tea products under the Lipton brand.

PepsiCo, Inc. serves wholesale and other distributors, food service customers, grocery stores, drug stores, convenience stores, discount/ dollar stores, mass merchandisers, membership stores, hard discounters, e-commerce retailers and authorized independent bottlers, and others through a network of direct-store-delivery, customer warehouse, and distributor networks, as well as directly to consumers through e-commerce platforms and retailers.

The company's operating profit increased by 3%, but the operating margin decreased by 0.7 percentage points. The profit growth was driven by higher revenue and cost savings, although this was partially offset by increased operating costs and higher commodity prices. There were unfavorable impacts from impairment charges, charges related to the Russia-Ukraine conflict, and brand portfolio adjustments. These were partly balanced by gains from the Juice Transaction.

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PepsiCo, Inc. Reportable Segment Revenue FY2022

PepsiCo, Inc. Return on Equity

Is the ROIC consistently at 12%-15% YoY for the past 5 years? Yes.

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PepsiCo, Inc. Return on Invested Capital vs Weighted Average Cost of Capital

The trendline for the number of shares outstanding is declining, which is something that an investor would be pleased to see. 

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PepsiCo, Inc. Shares Outstanding (Million Shares)

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Free cash flow used is a weighted average that is rounded to the nearest tens. In some instances, I used a more realistic number to represent the free cash flow.

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Total debt and cash and short-term investments are last quarter figures that are rounded to the nearest tens. In some instances, I used more realistic numbers to represent them.

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PepsiCo, Inc. Intrinsic Valuation

PepsiCo, Inc. Relative Valuation

PepsiCo, Inc. EV-to-EBITDA vs its peers